Portland Mortgage Market Update — September 11, 2026

This week had everything going for it. Last week's conflicting employment reports reflected a labor market that may be showing some weaknesses or at least is not as robust as previously thought. All we needed was some inflation reports this week that showed inflation coming in at or below expectations and we would have every excuse to expect a Fed rate cut at their meeting next week. With Labor Day on Monday it was a short week, all we needed to do was hold it together and wait for Friday's CPI report (spoiler: we couldn't). The week opened with Iran and the US trading shots on each other's oil tankers, sending oil prices skyrocketing to over $100/barrel. Higher energy prices stoked fears of inflation, sending Treasury Yields/mortgage rates higher. Treasury Secretary Bessent then delivered on an earlier promise he made where the Treasury would buy up long-term bonds to bring yields back in line- similar to what the Fed did during the pandemic to keep things in line. The only problem is Bessent may have talked his promise up a bit too much this week, saying "I am the house, bet against me if you want" but only committing to buying up $6Billion in treasuries (the market was expecting around $10 Billion this round, which is a drop in the bucket compared to Fed balance sheet growing by almost $5 TRILLION with their Quantitative Easing during COVID). He dared currency traders to challenge him, and the market collectively said "hold my beer". Also, as a reminder, THIS IS JUST WHAT HAPPENED ON TUESDAY AND WEDNESDAY!

Then Thursday happened. The Producer Price Index was released largely in line with what was expected. We all took a collective sigh of relief, then looked under the hood of the report and saw that some of the items that would also correlate to the PCE report actually came in .1% higher than what was expected. The PCE report is the Fed's preferred measure of inflation, so between this and the stubbornly high oil prices, the bond market was in trouble. The selloff was so intense that even though Bessent's buyback took place during today's auctions, we still saw Mortgage-Backed Securities worsen by about 60 basis points. So the rate we woke up that had no cost associated with it now costs between .5 and .625 points. Ouch.

CPI to Save the day? Sort of! This time last week we were hoping for the CPI report to come in at or below the expected levels. Heck, we were still hearing that yesterday! However this morning's CPI report came out a skosh hotter than expected and as it turns out the bond market just wanted some sort of guidance. With inflation running hotter, the odds of a Fed rate hike next week are back up to around 85% (up from 60% yesterday) and having some idea of what to expect next week stopped the bleeding. Rates are about even with where they ended yesterday (high 6's to low 7's) and now it looks like the pressure is on Fed Chair Warsh to raise interest rates at the next meeting or face questions about who is really running Fed policy.